Following the UK Spring Budget of 2024, which introduced significant changes to the taxation system for non-domiciled individuals in the UK—often referred to as UK non-doms—Barbados has emerged as a prime relocation destination. The proposed elimination of the remittance basis of taxation and other reforms has prompted many international entrepreneurs residing in the UK to reconsider their tax domiciles.
This article explores the benefits that Barbados offers, not just through its favorable tax system but also its luxurious lifestyle and flexible residency options, making it an increasingly desirable haven for those navigating the complexities of the UK’s tax overhaul.
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Changes to the UK Tax System for Non-Domiciled Individuals
Below are the key takeaways from the UK’s proposed changes to the tax system for non-domiciled individuals:
- End of the Remittance Basis: The 200-year-old remittance basis of taxation, which allows non-domiciled individuals to only be taxed on their UK income and gains, and foreign income and gains they bring into the UK, will be abolished.
- Introduction of the FIG Regime: A new four-year Foreign Income and Gains (“FIG”) regime will replace the remittance basis. Under this system, individuals can elect to limit their exposure to UK tax on non-UK income and gains for four years after becoming UK tax residents, provided they have been non-UK residents for the previous 10 years. While simpler, this regime is less generous than the remittance basis.
- Transitional Measures: To ease the transition, three measures have been announced:
- Rebasement of capital assets held personally to their values as of 5 April 2019 for disposals after 6 April 2025.
- A 50% tax reduction on foreign income for individuals transitioning from the remittance basis to the arising basis in the 2024/25 tax year.
- A two-year Temporary Repatriation Facility, allowing remittance basis taxpayers to bring accumulated foreign income and gains into the UK at a reduced tax rate of 12% in the 2025/26 and 2026/27 tax years.
- Impact on Protected Trusts: The protection of trusts settled by non-domiciled individuals will end, and these trusts will be subject to UK tax on an arising basis once the settlor can no longer elect the new FIG regime.
- Inheritance Tax (IHT) Overhaul: The UK government plans to adopt a residence-based IHT regime, subjecting an individual’s assets to UK tax based on their UK tax residency. A 10-year grace period will apply for incoming residents and a 10-year tail for those leaving the UK. Property settled in trust before 6 April 2025 will not be affected by these changes.
These changes aim to simplify and modernize the UK’s tax system for non-domiciled individuals, but the effects on wealth creators in the UK remain uncertain.
In light of these reforms, many high-net-worth individuals may be considering alternative destinations with more favorable tax environments. One such destination is Barbados, which offers significant advantages for those looking to preserve wealth, as detailed below.
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1. Taxation on the Remittance Basis
Barbados continues to offer a tax system that is particularly beneficial to non-domiciled individuals. Tax residents of Barbados who are not domiciled on the island are only taxed on Barbados-sourced income or foreign income that is brought into Barbados. Income earned outside Barbados and not remitted to the island remains free from local taxation. This contrasts sharply with the UK’s new tax regime, which eliminates the remittance basis and replaces it with a less generous FIG regime.
Additionally, Barbados offers opportunities to optimize taxation on any Barbados-sourced income.
2. Absence of Capital Gains Tax
A major advantage is that Barbados does not impose capital gains tax. Profits from the sale of assets, including property, stocks, and other investments, are not taxed, providing a clear benefit for investors and wealth creators who want to maximize their returns.
3. No Wealth or Inheritance Taxes
Barbados does not levy wealth taxes or inheritance taxes, making it an attractive jurisdiction for those who wish to preserve wealth across generations. This is a stark contrast to the UK’s shift toward a residence-based inheritance tax regime, which could impact non-domiciled individuals who have previously enjoyed favorable tax treatment.
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4. Lifestyle and Business Environment
Beyond tax benefits, Barbados offers a high quality of life, featuring stunning beaches, a warm climate, a stable political system, a rich social and cultural scene, and a broad range of real estate options for those with discerning tastes.
For entrepreneurs, Barbados also provides a welcoming business climate, with competitive corporate tax rates and access to a skilled local workforce eager to help businesses succeed.
Barbados is well-connected internationally, with direct flights to major global destinations, making it an ideal base for global citizens.
5. Residency Options
Barbados offers several residency options for those looking to relocate, including the Special Entry and Reside Permit for high-net-worth individuals, which grants indefinite leave to remain, further solidifying the island’s appeal as a relocation destination.
Conclusion
With the UK’s upcoming tax changes for non-domiciled individuals, Barbados presents an attractive alternative for those seeking a more favorable tax system without sacrificing lifestyle. Its remittance-based taxation, absence of capital gains, wealth, and inheritance taxes, combined with an idyllic setting, makes Barbados a prime destination for individuals seeking to preserve their wealth and enjoy a high standard of living.
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